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Understand blockchain economy in one article: how likely is digital currency?

Time : 19/12/2021 Author : 89u2pf Click : + -
        Editor's note: how much imagination space does Facebook's stable currency Libra have? Why does the central bank study digital currency? Why does the national level pay so much attention to blockchain technology?. Bitcoin is not an inexplicable "demon monkey". Technically speaking, decades ago, technical elites chose centralized databases, and today they have achieved efficient, stable and huge giant platforms such as Facebook, Google and wechat. Then, we start to want to pursue freedom now. If you want the private rights of data and digital assets, only when you enjoy the private rights can you have freedom, privacy and income rights. At the same time, we call for security. Although distributed ledgers may not be more secure than centralized databases, the former is to trust themselves and code, while the latter is to trust others and authority. From the perspective of human nature, we are obviously more inclined to choose the former.
 
        In terms of money, except for Hayek and a few other liberals who questioned the legal tender monopoly, most of them acquiesced in its existence and may not be able to find a better solution. The decentralized issuance of bitcoin has won the support of many people. Is this a better issuance mechanism than the Federal Reserve?. If you look beyond the clouds and see the essence, you will find that bitcoin is not a currency yet, and the defects in its issuance mechanism are fatal. However, bitcoin has opened Pandora's box to the world. How much imagination space does Facebook's stable currency Libra have? Why does the central bank study digital currency? Why does the national level pay so much attention to blockchain technology?.
 
        If the great crisis and depression in 1929 made the world see the vulnerability of the market, then the financial crisis in 2008 exposed the harm of government interventionism. What's more, after the crisis broke out, the federal Treasury and the Federal Reserve of the United States intervened to save the market. At that time, Fed Chairman Bernanke implemented the first phase of quantitative easing and decided to buy US $300billion of long-term treasury bonds and a large number of mortgage-backed securities issued by Fannie Mae and Freddie Mac. At this time, a group of technology geeks can't stand it. In December, 2008, a person code named "Nakamoto cong" released the bitcoin white paper — — a point-to-point e-cash system.
 
        "Upholding justice" requires top-level design and captures the "testicles" of the times. Chen Sheng and Wu Guang shouted, "the princes and generals would rather have seed", and the heroes of the grassroots bandits rose up. "When Emperor Gaozu beheaded the snake, Emperor Ping returned his life", Liu Bang beheaded the White Snake uprising and won the world. Nakamoto Congzhi refers to the key of legal currency: "the fundamental problem of traditional currencies is that they must be fully trusted to play a role. The central bank must be trusted not to devalue the currency. However, there is no lack of violations of this commitment in history … …". On January 3, 2009, when the first block of bitcoin network was excavated, Nakamoto criticized in the embedded text: "the chancellor of the exchequer stands on the edge of the second bank rescue".
 
        Nakamoto's ambition is not only to release a private currency (competitive currency), but to establish a "point-to-point e-cash payment system". Therefore, there are at least three meanings behind bitcoin:. He wrote in the white paper, "but the problem with this solution is that the fate of the entire monetary system depends entirely on the company that operates the mint, because every transaction must be confirmed by the mint, which is like a bank.". From private money, to the borderless banking system, and then to reshaping the global financial system, the first blockchain network gives the world such a huge imagination. In theory, Hayek wrote a book in his later years called "denationalization of currency".
 
        In this book, Hayek carried out the liberalism he insisted on all his life to the end, boldly proposed to break the national currency monopoly with the market competition mechanism, introduce competitive currency and private currency, and break the last fortress of the free market. However, if you have read this book, you will find that it is not a professional work of economics. The whole book lacks historical evidence, and the logical deduction that the Austrian school is good at is not rigorous enough. Hayek raised many uncertain issues in his book, such as the financial challenges brought by competitive currencies. However, the core question raised by Hayek is worth pondering: since the market is the mechanism of maximizing utility, why can't money be market-oriented and free competition?.
 
        After the publication of this book, Hayek asked monetarist Friedman about this question. As a believer in the free market, Friedman could not answer. He just said that money is not for fun and cannot be taken lightly. It must be issued by the state, and the monetary growth rate must be determined in the form of legislation to maintain price stability. In fact, most economists insist on currency nationalization, but there is no reliable theoretical support. Historically, the history of non nationalization of currency is much longer than that of legal tender. Weber, an economist, calls this kind of currency "Karta currency", which is "without the guarantee of the state" and supported by customs or contracts.
 
        Professor Akira Kuroda of Japan calls this kind of currency recognized and issued by some people as "hand over currency", also known as "payment synergy". The most typical example is gold and silver. For a long time, gold and silver have been the common currency in the world. The hard currency of trade in all countries does not belong to any country. Even in the era of the gold standard, the state issued legal paper money, but legal paper money is still anchored by free competition of gold, which flows freely around the world and is more rigid than paper money. The shells, nails, salt, stone coins, gold and silver, and bank certificates used by early people were not nationalized, but all spontaneously formed by the market. For example, banknotes are "vouchers" issued by private gold shops in early Venice, London and other cities to customers.
 
        Historically, gold, silver and bank certificates are not legal tender, and the time of non nationalization of currency is much longer than nationalization. Why was currency monopolized by the state later? Is this the result of state machine intervention or the inevitable evolution of economic laws?. The first central bank, the Bank of England, was founded by Scottish William · Peterson was founded in 1694. This royal chartered central bank was initially private, mainly raising war funds for the government and owning the right to issue coins. The introduction of the peel regulation is a landmark event in the history of human currency. This regulation stipulates that private note issuing banks will no longer be increased, and the amount of money issued by existing banks will be limited.
 
        At that time, a total of 279 private banks and joint-stock banks in England had the right to issue coins. If the bank failed, the issuance quota would naturally expire and its quota would be transferred to the Bank of England. The issuing department of the Bank of England actually undertakes the basic functions of the central bank, including issuing money; Manage national debt; Cooperate with the Ministry of Finance and the Minister of finance to implement monetary policy; Acting for the government to keep gold and foreign exchange reserves, etc. The peel regulations weakened the issuing power of private banks, controlled the amount of legal currency of private banks, and confirmed the central bank status of the Bank of England and the legal repayment currency status of Bank of England bills. Later, in order to avoid the conflict of "being both a referee and an athlete", the Bank of England gradually gave up its commercial banking business and became a veritable central bank, which was nationalized by the labor government in 1946.
 
        The Bank of England has become the standard template for the central banks of other countries, playing the role of "lender of last resort", which is "issuing bank, Bank of bank, government bank". 【2】。 However, after the adoption of the peel act, the then British philosopher Herbert · Spencer questioned this. Spencer's reason is the same as Hayek's, he pointed out:. "Since we believe in the amount of tea sold by the grocer and the amount of bread sold by the baker, we can also believe that heatonandsons or other enterprises in Birmingham will also supply us with saffron and shillings according to their risks and profits.
 
        ”。 Spencer's proposition annoyed Stanley, the British economist at that time; Jevince. Jevince said bluntly, "nothing is more unsuitable for enterprises to compete than money.". Javans cited the "Gresham's law" as the basis, saying that "good money cannot expel bad money, which just proves this Law". Later, the economic circles generally accepted javans' view that the money market is prone to the problem of bad money driving out good money, so the issue of money should be handed over to the state. In the war years, most governments took over the central bank and currency issuance rights. Since then, people have gradually become accustomed to the rules of currency nationalization and legal tender.
 
        According to the nature of money &mdash& mdash; Money is a contract. The non nationalization of money is tenable in history and theory. Bitcoin, Ethereum, Libra stable currency and private currency are at least "reasonable". Friedman's friend Mr. Zhang Wuchang claimed that he was not proficient in monetary theory, but he revealed the mystery of money &mdash& mdash; "A note or a check is a contract.". Whether it is sheepskin, gold and silver, cigarettes, nails, rice, stone coins, or gold standard currency, paper money, money is the common contract of the market, that is, the transaction solution &mdash& mdash; Reduce transaction costs.
 
        In ancient times, gold and silver coins were scarce, and the land rent agreed with farmers to pay the land rent with rice. At this time, rice was both an asset and a trading medium. For example, the stone coin mentioned by Friedman in his book The Curse of money. At the beginning of the 20th century, on Yapu island in the Caroline Islands in the Pacific Ocean, this primitive Island did not have the interference of the government and monetary authorities, and the local area did not produce gold and silver. In order to solve the transaction problem, the islanders finally chose a huge stone wheel called "Fei" as the payment currency after long-term exploration. During the great depression, 1055 banks in tennano market town, Washington, stopped cashing, and transactions in the city were paralyzed for a time.
 
        However, the chamber of Commerce and industry plans to issue certificates equivalent to 25% of depositors' deposits, some of which are issued in the form of wooden chips with denominations of 25 cents and the size of postcards. Merchants agree to accept this currency and tide over the difficulties. Professor akishi Kuroda analyzed this: "it is not based on the actual creditor's rights, there is no guarantee from the government, but on the fact that it is only wood chips or paper scraps as currency, which is completely based on the loose agreement shared by people in the city." 【4】。 At present, the legal tender of a country, whether it is the US dollar or the Japanese yen, is a transaction contract jointly formulated by all citizens of a country. However, whether the contract is fulfilled or not depends on the market.
 
        In his book economic explanation, Zhang Wuchang described an example: in the war years, when this happened, the 10 yuan note was torn in two and used, and half of it was 5 yuan. Torn into half of the legal tender, the bank will not accept it (unless it is exchanged for new currency), which is not recognized by the law, but the market still recognizes it, trading at a value of 5 yuan. For example, Professor Akira Kuroda described the famous Maria · in the world history of monetary system; Theresa silver &mdash& mdash; A common currency widely circulated in the countries around the Red Sea in the 19th and 20th centuries. Many economists including Keynes, Hayek and Weber have paid attention to this historical currency.
 
        Maria · Theresa silver coin is a free currency that transcends national authority, territory, nationality and culture. This silver coin was first issued by Austria as legal tender and was named by the famous Austrian queen in the 18th century. In 1854, Maria · Theresa silver coins were abolished in Austria and banned in the Ottoman Empire, becoming "non legal tender". However, this silver coin from Vienna has not been reduced, but has been more widely circulated in Africa, West Asia and other countries for a long time, and has become an international regional currency. British companies' trade in leather, oil, sugar, fiber products, etc. in the Red Sea field is settled in this silver coin.
 
        Therefore, money is an "invisible agreement" spontaneously recognized by the main body in market exchange. In essence, all currencies are agreement based. The US dollar is the contract of Americans, the euro is the contract of euro zone countries, and digital currency is the contract of digital currency holders. The supporters of digital currency generally understand contracts as "consensus", and the implementation of contracts is called "bookkeeping". Bitcoin is the contract of bitcoin supporters, Ethereum is the contract of Ethereum supporters, and Libra stable coin is the contract of Facebook supporters (2.7 billion potential users worldwide). For example, Ethereum is a typical contract currency. Ethereum has an innovation, that is, smart contract. Developers can use smart contract to develop DAPP, and supporters can use Ethereum to invest and consume DAPP.
 
        This is the application scenario of "Ethereum", a common currency. Whether it is an agreement spontaneously formed by the market or a Contract negotiated by groups and countries, the purpose is to determine a reliable and credible trading medium (currency). What is reliable and credible?. In addition to uniform texture, non perishable, easy to carry and easy to cut, the most fundamental thing is the stability of price (value). No country or group will use an unstable medium as currency. In history, no unstable currency can last long. All currencies collapse due to substantial depreciation or relative value instability. The stability of currency value is the soul of currency.
 
        Only when the price is stable can money have credit and people dare to hold it. On the contrary, people avoid it, even worthless. In the economic interpretation, Mr. Zhang Wuchang pointed out pointedly: "from the perspective of contract, currency is important, and in this way, the emergence of inflation or deflation is a breach of contract … … the noise we hear demanding price stability is actually demanding compliance." 【3】。 Looking at bitcoin, Ethereum and EOS, the prices of these digital currencies have increased and decreased greatly, and the prices are extremely unstable. In essence, they violate the currency contract, resulting in the loss of the transaction function attribute of currency.
 
        From then on, they gradually moved away from the currency and completely became speculative digital assets. First of all, bitcoin, Ethereum and EOS emphasize decentralization, and there is no responsible entity for currency issuance. In other words, there is no institution similar to the central bank to maintain the stability of money prices. Nakamoto expressed his distrust of the traditional banking system and his dissatisfaction with the over issuance of currency, and tried to maintain the non depreciation of bitcoin by issuing a quota (21million). In fact, this method is mechanical and ineffective. Money is not issued for issuance, and its function is to serve market transactions. Money should not be issued in a fixed amount, but according to the needs of the market.
 
        Nakamoto used the quota issuance mechanism to try to make bitcoin appreciate continuously, but the result was just the opposite. Ethereum's smart contract has promoted the development of DAPP and found a good application scenario for Ethereum's currency. Many people buy Ethereum investment projects, and the project party is also willing to charge Ethereum. However, when the price of Ethereum fell sharply, this beautiful application scenario collapsed. In the second half of 2018, whenever bitcoin fell, Ethereum fell more fiercely, especially when bitcoin fell below the key support of $6000, Ethereum fell sharply. The reason is that a large number of project parties sold Ethereum and collective stampeded. They abandoned Ethereum in exchange for dollars to stabilize their wealth value.
 
        In the era of commodity and metal currency, the most simple, primitive and commonly used method is to choose reliable commodities or metals. For example, islanders prefer stone coins, fishermen prefer shells, and nomads prefer
 
        
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